Is the State Retirement Boom Finally Here?

As horrible as the ongoing economic slump has been for state governments, it brought with it at least one positive side effect: putting off, if only temporarily, a long-feared brain drain caused by large numbers of veteran state workers retiring. But that may be

Photo courtesy of Michigan.gov

"It's the best job in the world," said Jack Hodge, a boat captain in the Michigan Department of Natural Resources Fisheries program. "Early retirement scares me. When it's my time to retire I will-and I'd like to see the other guys move up-but I don't want to leave the vacancy for them. I don't want to go. I've had a lot of great years here."

As horrible as the ongoing economic slump has been for state governments, it brought with it at least one positive side effect: putting off, if only temporarily, a long-feared brain drain caused by large numbers of veteran state workers retiring. But that may be finally ending.

Plummeting stock portfolios and home values prompted many Baby Boomers to keep working long after retirement age. In a of personnel managers by the Center for State & Local Government Excellence in 2009, the year of the steepest declines in state revenues, 80 percent said that the economy was impacting the timing of retirements, with an overwhelming majority of those managers saying that employees were working longer than expected. "What was once a planned exit is no longer a planned exit," says Daniel Hackler, Indiana's state personnel director. "

There's this dam of older folks."

This unpredictability has made the challenge of transferring knowledge to younger workers and planning for future workforce needs in specialized areas, such as information technology and health care, more daunting, but also more critical. "It has forestalled the inevitable," says Hank Batty, deputy administrator for programs in the Oklahoma Office of Personnel Management. "We have not had to deal with the issues that five years ago we thought we would be dealing with now. However, there is no anti-aging cream in the works, so we will have to deal with this at some point."

In some states, that point may be now because of a variety of factors, from increased confidence in the economy to high-profile conflicts over benefits and collective bargaining rights. Wisconsin, home to the most dramatic labor battle of the year, already has seen a dramatic spike in retirements. Thousands of state and local workers flooded the state Capitol to protest legislation rescinding their collective bargaining rights and asking them to contribute more toward their pensions and health care benefits. Now that the measure is law, retirements are soaring: Last month alone, the Wisconsin Retirement System received retirement applications from 3,026 state and local workers, well over double the number in the same period last year.

In other states, just the threat of changes to pension and health benefits is causing some employees to think about retiring. The Maine Public Employees Retirement System has posted a prominent warning sign on its website about longer-than-usual wait times due to an "unusually high volume" of requests for retirement estimates and other inquiries from state and local workers. In March, these requests rose 150 percent over the same period last year, says Retirement System Executive Director Sandy Matheson, largely because of proposals being considered by the legislature that would require higher worker contributions towards pensions and health care. "A lot of people are considering their options while they wait to see what the legislature does," she says. Almost a quarter of Maine's state government workforce is eligible for retirement.

The Texas State Employees Association recently surveyed its members about how they would respond to proposals being considered in the legislature, including furloughs, pay cuts, significant increases in health care costs and the elimination of longevity pay, which rewards employees for their length of service in state government. Among respondents who are eligible for retirement, 57 percent said they would retire if the legislature were to enact any of the proposed changes.

Shifting demographic

Nationally, the number of state workers 55 and older has nearly doubled since 2000, while the number of workers younger than 55 has grown only slightly, a Stateline analysis of unpublished data from the Bureau of Labor Statistics Current Population Survey shows.

Besides having a high proportion of older state workers in leadership positions or with highly specialized knowledge, some states also report another problem caused by budget cuts. "You have all of the Millenials at one end of the spectrum and the Baby Boomers at the other, and there's no in between," says Oklahoma's Batty. "The problem is that over the years, as budgets have been cut and cut and cut, the first thing that we start cutting out is middle management positions. There is no middle management anymore."

Even with a strong plan for the training and development of younger workers, it takes time to develop the supervisory experience necessary to lead large groups of people, state personnel directors emphasize. Finding competent people who have both the supervisory experience and the specialized knowledge to fill some key vacancies created by retirements has already been difficult in Oklahoma, Batty says. Even when the budget exists to fill a key management position, sometimes the state has been unable to find a suitable replacement. "We've just had to consolidate those duties among other positions," Batty says. "That's the part of knowledge transfer that to me is very scary."

The struggling private sector job market has made it easier for states to recruit talented young people, says Shannon Templet, director of the Louisiana Department of Civil Service, but keeping those workers and training them to run the state government of the future presents challenges. "Right now getting those employees isn't an issue, but there is going to be a big issue down the road," she says.

Some state personnel directors also worry that the labor and benefit battles now accelerating the exodus of some retirement-eligible workers are eventually going to create recruitment and retention issues among younger workers, especially when the economy picks up. "As benefits get chipped away because of budget issues, if we're not careful we'll lose the attractiveness and stability of state government as an employer," says Eva Santos, director of the Washington State Department of Personnel.

In Michigan, more than 2,500 employees retired at the end of last year because of an aggressive incentive package, further squeezing a workforce that has been diminished by nearly a decade of budget cuts. One agency that has felt the impact is the Department of Natural Resources, which lost 148 of its 1,250 employees, many of them critical to core agency operations, according to Public Information Officer Mary Dettloff. Because of an older-than-average workforce, the agency has been emphasizing succession planning and knowledge transfer for years. As part of a major statewide workforce planning push in 2009, the agency developed a tool for rating employees based on their estimated likelihood of retiring and the difficulty of finding a replacement. The agency tries to capture and transfer critical knowledge from those employees before they are on their way out the door.

Still, there's no way to fully prepare for such a high level of turnover, Dettloff says. The recent wave of retirements has been particularly hard on the agency because much of its budget targets particular purposes, and and a significant loss of workers in those areas can be devastating.

The state's forestry program, for example, relies on timber sales to sustain itself, which requires having enough people to do everything from harvesting and chopping the wood to the management of the related sales, paperwork and accounting. And the agency now has fewer and less-experienced people in those roles. They've been able to fill some of the forester positions, but are cross-training those employees to fight forest fires-another staffing area that has been hard-hit by retirements. "If we get more than one major fire going at the same time in this state, we'll be in big trouble," she says.

The state's $16 billion fishing industry also faces major obstacles because of all of the technicians, biologists and fieldworkers who are required to manage and restock the state's thousands of lakes and rivers with fish. There are now only a couple of fisheries biologists staffing the sprawling Upper Peninsula.

"There is no easy, high-tech way to grow a fish," Dettloff says. "The only way to do it takes a lot of hands-on, labor-intensive fieldwork."

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